I’m Professor and Chair of the Department of Economics at LIU Post in New York. I’ve published several articles in professional journals and magazines, including Barron’s, The New York Times, Japan Times, Newsday, Plain Dealer, Edge Singapore, European Management Review, Management International Review, and Journal of Risk and Insurance. I’ve have also published several books, including Collective Entrepreneurship, The Ten Golden Rules, WOM and Buzz Marketing, Business Strategy in a Semiglobal Economy, China’s Challenge: Imitation or Innovation in International Business, and New Emerging Japanese Economy: Opportunity and Strategy for World Business. I’ve traveled extensively throughout the world giving lectures and seminars for private and government organizations, including Beijing Academy of Social Science, Nagoya University, Tokyo Science University, Keimung University, University of Adelaide, Saint Gallen University, Duisburg University, University of Edinburgh, and Athens University of Economics and Business. Interests: Global markets, business, investment strategy, personal success.

A woman walks with flowers past a RMB (renminbi) poster outside the Bank of China in Hong Kong on September 5, 2011. Hong Kong had 553.6 billion in yuan deposits by the end of June, up 517 percent compared with the same time last year. (Image credit: AFP/Getty Images via @daylife)

During the Presidential debate on Monday night, Presidential candidate Mitt Romney made it quite clear that China is an unfair trade partner. That’s why he plans to name it as “a currency manipulator” on his first day in the White House.

I am not sure whether Mr. Romney will follow through with this threat, as politicians usually say one thing on the way to the office, and do another once there. But I’m concerned about the rationale behind this position.

While it is fair and just for the US to ask China to adhere to the World Trade Organization regime, such a request is based on two unrealistic assumptions.

First, it assumes that China is in a position to deal with the negative effects of an appreciating renminbi (RMB), as Japan did with the yen appreciation in the 1980s—by accelerating its transformation from an imitator to an innovator. But China has yet to take this step, as it lacks the technology and management know-how, remaining an imitator rather than an innovator—an irony for a country that has invented a number of products that have changed the course of history.

China lacks the ability and capability to turn inventions to innovations that lead into a new generation of products and industries and thereby help companies achieve sustainable competitive advantages. It lacks the management know-how because it has yet to make the transition from a centrally planned system to a market system.

The second premise is that China will yield to US pressure, as Japan did in the 1980s.

A close examination of China’s history, however, confirms otherwise. Unlike Japan, when China pressured by foreigners, it has chosen seclusion and confrontation rather than cooperation. How else could someone rationalize China’s decision to burn its Treasure Fleet of the Dragon Throne in 1433, putting an end to Admiral’s Zheng He’s seven long and unprecedented voyages, and the trade and the prosperity that followed — leaving the country defenseless to the aspirations of every colonial power at the time.

How else could someone explain China’s decision to confront and fight Europeans rather than cooperate and trade with them, as it did with the US in the mid-1850s?

In short, the RMB battle won’t be won as easily as the yen battle, and may oscillate into an open trade war.

What does it mean for Wall Street? It is certainly not good news, as US-China tension is the last thing investors need at this time, as it adds uncertainty to an unsettled market.

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